The History of Fintech: How Has the Industry Evolved?

What is fintech? What do fintech companies do? Here’s how the industry has evolved, from electronic funds transfers to modern fintech solutions such as C2FO.

When you think about fintech, you probably imagine Silicon Valley startups, mobile funding solutions and cryptocurrencies. However, the concept of fintech emerged several decades before you could download an app on your phone and make transactions with the push of a button. In fact, you can trace fintech back to — not the internet, not the 2008 financial crisis — but to the 1850s, shortly before the Civil War.

Many people believe that fintech is synonymous with replacing traditional banking. In reality, some of the most successful fintech companies, such as Plaid and Venmo, have helped financial institutions become more efficient. And while fintech solutions can’t replace traditional banking, they often make funding and other financial services more accessible if you’re a small to mid-sized business.

This article explores what fintech is and highlights some major milestones in fintech’s evolution in the graphic below.

What is fintech?

Fintech, a term that combines the words “financial” and “technology,” is the use of technology to improve the traditional delivery of financial services. Fintech aims to make financial processes easier, faster and more accessible to businesses and individual consumers.

The main function of fintech is to develop software for this common goal, but there are different types of fintech companies that serve various roles in the financial services ecosystem. Here are some of the more common types.

• Digital lending uses web-based platforms to qualify and approve funding, usually faster than traditional lending processes through a bank.

• Payment technologies simplify and expedite money transfers, often using solutions such as blockchain — a technology that creates a permanent record of information to enable secure transactions.

• Digital banking enables customers to access banking services online instead of using a physical bank branch.

• Alternative credit services use data such as a customer’s payment history and financial behavior to determine creditworthiness, making funding more accessible to borrowers with low credit scores or limited credit history.

• Equity financing tools make it easier for companies to raise capital.

• Wealthtech offers digital solutions that help customers manage wealth and make financial decisions.

• Insurtech aims to make insurance services more efficient and cost-effective.

• Regtech addresses regulatory, compliance and security issues arising from fintech, helping companies reduce risk.

• Banking as a service (BaaS) products enable licensed banks to integrate banking services into non-banking business offerings.

Where does C2FO fit into fintech?

While some fintech types serve as standalone alternatives to financial institutions, others are used by banks to improve services such as lending. C2FO stands somewhere in between, operating as a financial marketplace. At its core, C2FO’s Early Payment program uses a web-based platform to help suppliers request early payment from their buyers in exchange for a discount, increasing cash flow and giving businesses more control over their accounts receivable.

C2FO innovates on early payment and working capital solutions by:

• Centralizing your outstanding invoices in a user-friendly portal to simplify early payment arrangements.

• Using a dynamic discounting model, which gives you control over the timeline and cost associated with the invoices you choose to accelerate.

• Giving you the option to fund an early payment discount yourself or through a global funding network (or both).

• Allowing you to accelerate invoices without the cost of a discount using the C2FO CashFlow+™ Card.

• Offering an asset-based lending experience that integrates with C2FO’s Early Payment program.

In recent years, fintech solutions such as C2FO’s have been developed to make financial services more accessible to small to mid-sized businesses, as well as those owned by minorities, women and veterans — groups that have historically lacked access to traditional banking services. However, fintech didn’t start that way. Here’s a closer look at the industry’s history, from 1858 to today.

The history of fintech infographic

In closing

If you’re a small to mid-sized business, you might not qualify for working capital solutions such as business loans or lines of credit through a traditional bank. Innovative fintech solutions such as C2FO’s can help you take control of your accounts receivable and grow your business — click here to learn more.

This article originally published June 2021, and was updated January 2023.